Covid-19: Watershed moment for Indian Economy?

There is a lot of debate going on in the country about the migrant labor and their plight due to the Covid-related lockdown and subsequent economic slowdown. Practically all business enterprises, big or small, organized or unorganized, street hawkers or daily wagers had brought their operations to a grinding halt. Most did so under strict directions from the government. The migrant labor, mostly at a subsistence level compensation, lived out of government doles and social support for a month or so, and with no visibility of the economy opening, they had no other option but to hitch-hike back to their native place. Most economists started crying hoarse at this mass reverse migration of labor and the purported inaction of the government. On one hand, they are apprehensive of the revival of the urban economy once the lockdown is lifted, as the labor might not return in full strength. On the other hand, they are worried about the imminent misery that the same labor will face back in their native places, as livelihood opportunities are limited there. (Look at the paradox, when migration happens, they talk about urban ghetto-ism and crime. Now when the migrant is going back, they are again complaining). Their fears might be genuine, but I have a different take on this. I believe this is going to be a watershed moment for our economy - both urban as well as rural. Though it is not backed by any empirical research, but I am sure some of you would resonate with my thoughts.

I strongly feel that our manufacturing sector, which has always been majorly non-competitive globally, not just because of scale of operations but also because of quality/finish of products and production turn-around time. When the world has long back incorporated robotics and automation, helping them in increasing not just uniformity of quality and finish but also faster production turn-around time, why is the Indian manufacturer dithering? The inhibition, at least for most small and medium enterprises, is majorly due to the prohibitive cost as compared to the readily available cheap migrant labor. What they willfully avoid seeing is the massive global opportunities that would open up if they start producing better finished goods in large scale. They have consciously chosen the domestic/third world market over the developed markets, as here quality is easily comprised for price. But they fail to realize that their protected backyard is also not going to last with them for long. And we see that the MSME industries in India are facing a serious existential crisis due to low priced yet high quality products from abroad. The single biggest driver to the probable surge in the automation of our manufacturing sector would be, the highly likely eventuality of the migrant labor NOT returning in full strength after the Covid crisis subsides. Now, if this is supplemented by fiscal support, like tax holidays etc. from the government, the pace of automation would get augmented.

To understand this phenomenon of migration let us go a bit deeper into the problem. Isn't it paradoxical that since long the economists and sociologists had identified migration of labor as one of the biggest impediments to India's development, and now the same people say that if migration doesn't happen Indian economy is doomed? One of the main reasons cited for poverty in India was excess migration of labor and a consequent below-subsistence level/exploitative wage structure. People migrate predominantly for one simple reason - extremely low 'ease of living' index in villages and smaller towns.

If we reflect back a little, our country has seen some major socio-economic structural changes in the last decade. Changes which were aimed at providing a facilitating environment which can foster economic development. Some of the game-changing developments, though late by decades, are - integrating the majority population (40 crore mainly rural & semi-urban population), with the banking system of the country through the Jan Dhan account; over 90% of the population have aadhar based identity cards; 100% villages availing electricity supply; over 8 crore LPG gas connections given to rural areas (benefiting approximately 40 crore people); over 22 crore soil health cards issued; almost 2 crore houses provided under the PM Housing Scheme; over 10 crore toilets made by the government under the 'Open Defecation Free' scheme; crop insurance, easy collateral-free loans, world class all-weather road connectivity of villages and many many more changes. Communication, internet, television, health, transport all have seen dramatic improvement. Many agri-specific facilities which were not easily available in most rural areas are now easily accessible e.g abolition of Agricultural Produce Market Committee (APMC) Act allows farmers to sell anywhere in the country, access to kisan credit, crop insurance, e-mandis etc.The 'ease of living' in rural India has improved dramatically. On the contrary, the living conditions in most of our cities, specially for the migrant labor, has deteriorated significantly, not to mention the nightmare of abject poverty and loss of self esteem they face during circumstances like the current lockdown.

The lure for city migration for most migrant labor was a job which provided a living wage at regular intervals with which he/she could access uninterrupted electricity, piped water supply, telephone connectivity, entertainment through television, internet, access to modern goods and services, banking services, schools, etc. These are all basic necessities in today's world. All these weighed heavily against the prevailing conditions in the small towns and villages. But not any more now. The gap has shrunk considerably over the last decade. The so-called urban benefits are readily accessible even in villages, and in all probability at a much cheaper rate. Thanks to the fast-forward mode in which the current government is working, we can expect a considerable increase in employment and livelihood opportunities in the hinterland too. With the bottle necks of exploitative middlemen, corrupt regulatory authorities and lack of infrastructure fast getting removed, agriculture is again gradually becoming an attractive and viable 'business' option for many. Isn't it highly probable that now the young brigade of India would choose their native places over alien bigger cities when it comes to career choices? Will this not spur the rural economy?

And the icing on the cake could be the fast diminishing reputation of China globally as a responsible and trustworthy country .